Equity ETF flows drop below €1bn

Net sales of equity ETFs fell dramatically in August, according to Lipper data, with net flows into eurozone equity ETFs showing the biggest drop, falling into negative territory.

Active bond flows hit hard in February

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Net flows into equity ETFs from European investors fell to just under €1bn, from €5.4bn the month before. The spectacular fall can be explained almost entirely by a dramatic reversal in European equity flows, as well as a sharp reduction in appetite for financial sector ETFs.

The appreciation of the euro over the summer proved a drag on eurozone equity performance (see graph below) and led to a decrease in demand for the asset class. Net flows dropped from +€1.5bn in July to -€0.3bn in August. Financial sector ETFs, the second best-selling category in July, also saw price declines in August, leading to a decrease in net flows from €1.3bn to €0.4bn over the month.

Currency drives equity markets

US equity ETFs were the only equity sector not to suffer a reduction in net inflows in August, with European investors taking advantage of the weakening dollar to beef up their positions.

Bond ETF flows rose marginally to €2.1bn, with the bulk of net new money being allocated to corporate bond ETFs in the US and Europe.

Separate figures from Morningstar revealed flows into European-domiciled ETFs slowed considerably in August. The inflows of €3.5bn marked the lowest level seen in a one-month period since September 2016.

The reasons for the slackening pace of inflows included net inflows to equity ETFs hit a 11-month low, demand for bond ETFs remained subdued for the second month running, and commodity ETPs suffered net redemptions for the first time in eight months, according to Morningstar.

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